What Are Financial Ratios? Financial ratios are calculations that compare two or more figures from a company’s financial statements to measure performance and financial health. Analysts, investors, and managers use financial ratios to understand how well a company can meet debt obligations, generate profits, and use resources effectively. Ratios also make it easier to compare…
What are Proceeds? Proceeds refers to the cash received from the sale of goods or assets during a particular period. The total is obtained by multiplying the quantities sold by the selling price per unit. The proceeds received before any deductions are made are known as gross proceeds, and they comprise all the expenses incurred…
What is a Credit Score? A credit score is a number representative of an individual’s financial and credit standing and ability to obtain financial assistance from lenders. Lenders use the credit score to assess a prospective borrower’s qualification for a loan and the specific terms of the loan. Essentially, it is used to determine the…
What is Leverage? In finance, leverage is a strategy that companies use to increase assets, cash flows, and returns, though it can also magnify losses. There are two main types of leverage: financial and operating. To increase financial leverage, a firm may borrow capital through issuing fixed-income securities or by borrowing money directly from a…
Definition of Bullish and Bearish Professionals in corporate finance regularly refer to markets as being bullish and bearish based on positive or negative price movements. A bear market is typically considered to exist when there has been a price decline of 20% or more from the peak, and a bull market is considered to be…
What is a Bank Line? A “bank line” or a “line of credit” (LOC) is a kind of financing that is extended to an individual, corporation, or government entity, by a bank or other financial institution. This type of credit is different from term loans, such as housing mortgages or car loans. Usually, the borrowers…
Understanding Dividends: Meaning, Types, and Why They Matter A dividend is a portion of a company’s profits that is paid out to its shareholders. Dividends are one of the most common ways companies distribute profits to shareholders. When a company earns a profit and accumulates retained earnings, it can either reinvest that money into the…
What is Top-Down Budgeting? Top-down budgeting refers to a budgeting method where senior management prepares a high-level budget for the company. The company’s senior management prepares the budget based on its objectives and then passes it on to department managers for implementation. Sometimes, the managers may put forward suggestions for the budget before the budget…
What is the Operating Cash Flow Ratio? The Operating Cash Flow Ratio, a liquidity ratio, is a measure of how well a company can pay off its current liabilities with the cash flow generated from its core business operations. This financial metric shows how much a company earns from its operating activities, per dollar of…
